Tight stocks, firm sugar prices: Diwali demand and policy action – Editorial by Uppal Shah
Indian sugar prices are rising ahead of Diwali as low opening stocks, delayed crushing and limited imports tighten supplies. Maharashtra prices have reached ₹5,050–5,100 per quintal, with further gains possible. Zero sugar diversion for ethanol in ESY 2026-27 is expected to strain mill distilleries and increase financial pressure.
As I write this, India is about a fortnight away from Diwali, the biggest demand window of the sugar calendar. The domestic market is already signalling what it thinks of the supply position. Ex-mill prices in Maharashtra have moved this week from around Rs 4,650 per quintal to Rs 5,050–5,100, while Uttar Pradesh is quoting Rs 5,200–5,300. I believe this is not a passing festive spike. The fundamentals point to prices staying firm for the next few weeks.
A season that opened thin
The 2026-27 sugar season began with an opening stock of around 36 lakh tonnes, among the lowest in several years. Against this, the Government released 30 lakh tonnes for sale in October across two tranches. The first fortnight got 14 lakh tonnes and the second got 16 lakh tonnes, of which 2 lakh tonnes was for sugar imported under advance authorisation. These were welcome and timely releases. Yet every tonne released from a thin opening stock leaves less in reserve, and the market knows it.
The import route was expected to bring in around 10 lakh tonnes of duty-free raw sugar, but it has largely not materialised. With global prices firm, the disparity simply did not work for most refiners. Some refineries have sold small quantities into the domestic market, perhaps 2 to 3 lakh tonnes and possibly less. That helps at the margin, but it does not change the picture.
New sugar that has not yet arrived
The country had been counting on fresh production in October to bridge the gap. That has happened only in part. In Maharashtra, around 65 mills have begun crushing, and industry sources estimate they have produced about 2 lakh tonnes. Another 2 lakh tonnes or so is expected this week. The Government has rightly permitted mills to sell sugar produced in October during October and November, over and above the regular release quota, so this sugar needs no release order and can move freely. It is a sensible correction, but the volume is small against festive demand.
Elsewhere, the calendar has slipped. Karnataka remains caught in farmer agitation, and the Chief Minister is now stepping in. Millers there say Karnataka sugar will not reach the market before Diwali. Uttar Pradesh is in a similar position, with crushing expected to reach full pace only after 10th November.
In Maharashtra, Raju Shetti is stepping up pressure on sugar mills for higher cane prices for the crushing season and back the demand for a higher sugar MSP. The Government has constituted a committee under former NITI Aayog member Prof. Ramesh Chand to examine farmers’ returns and the minimum selling price of sugar. That is an important step, and Shetty is expecting a positive outcome in the coming week. Until then, the trade should watch what the remaining 100 to 120 mills in Maharashtra choose to do: start, wait, or crush slowly.
Millers in no hurry
Every miller knows how tight Indian stocks are, and that shapes behaviour. Nobody is selling in force. Mills are on wait and watch, releasing small quantities and raising quotes the very next day. In a market where tomorrow’s tonne is worth more than today’s, that is a rational response.
Demand, meanwhile, is about to peak. Dealers and bulk buyers have stockholding limits that allow only about 15 days of cover, so they will have to return to the mills repeatedly through the festive period. If that buying arrives in strength, prices could touch Rs 5,500–5,700 per quintal. Domestic prices are now within 10 to 12 per cent of import parity, and I feel that is where they are likely to find their ceiling.
That leaves a policy choice. If domestic prices hold below parity, imports will not flow on their own, and a measured incentive would help build a buffer. Opening the window to white sugar alongside raw sugar would widen the options further. The industry is looking for a timely decision; in a season this tight, the timing matters as much as the measure.
The longer arithmetic
This is not only a Diwali story. Production in 2026-27 is expected to be lower, and the end-of-season stock could be uncomfortably thin. 2027-28 does not look easier either. A low closing stock followed by another modest crop is a combination the market will price in early.
A year, perhaps two, without cane juice
The same arithmetic is reshaping the ethanol programme. For Ethanol Supply Year (ESY) 2026-27, beginning 1st November, the Government has directed that sugar diversion for ethanol be reduced to zero. Accordingly, the Oil Marketing Companies’ (OMCs) tender seeks no ethanol from cane juice, sugar syrup or B-heavy molasses. Given the stock position, it is a prudent call; household sugar has to come first. But we should be clear-eyed. On current trends, neither this season nor the next is likely to allow ethanol from sugarcane juice at any scale.
The shift is already visible in the numbers. Four years ago, in ESY 2021-22, about 84 per cent of the ethanol supplied for blending came from sugarcane juice and molasses. By ESY 2025-26, sugarcane-based feedstock accounted for only about 28 per cent of OMC allocations, with grains, led by maize, taking the rest. With zero diversion this year from sugarcane juice and B Heavy Molasses, the sugar industry’s share will narrow further, to C-heavy molasses alone.
That places real stress on mills that expanded or installed large distillation capacity on the strength of the ethanol programme, much of it financed with debt. Idle capacity still carries interest. The industry’s demand for an interest subvention scheme for these mills deserves serious consideration. It would keep the multi feedstock capacity India has built healthy enough to return to work when cane balances recover.
The Government has guided the sector through tight years before, and the tools are at hand:
calibrated releases, a timely import window, a fair outcome from the Ramesh Chand committee, and support for stressed distilleries. Used together and used in time, they would let the industry come through this squeeze better prepared for the next one.
That is the need of the hour.
For further inquiries or to contact Uppal Shah, Editor-in-Chief, please send an email to Uppal@chinimandi.com.
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Source : ChiniMandi
